Red Hat Hysteria: Aren't We Past The Point Of Being Surprised That 'Free' Is A Part Of The Business Model?

from the seriuosly? dept

As you have likely heard by now, a few days ago, IBM announced that it was purchasing Red Hat for $34 billion. I've seen a fair bit of hand-wringing over this buyout, but don't really feel that strongly one way or the other about it. It was nice having a giant company like Red Hat to point to in explaining how of course open source software could be a big business, but... that still exists within the confines of IBM.

There could be some concerns on the patent side, as Red Hat at least has long positioned itself as a fighter against patent trolls, though in practice the company has sometimes been a bit wishy washy on that, and some have accused the company of selling out its vision on patents in the past. Of course, since Red Hat is a founding member of the License On Transfer (LOT) network, that at least should prevent any of its existing patents from getting out to patent trolling entities. Still, IBM has, for decades, had the reputation of being a very aggressive patent litigator, and has at least some history of trolling and bad practices. But, IBM has long embraced open source, and its announcement pledges to uphold Red Hat's various other commitments towards open source and against patent trolling: "IBM and Red Hat will remain committed to the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network."

However, what struck me most about the deal was't so much the deal itself, but some of the coverage of it. I'll use Wired as the unfortunate example of the kind of coverage I find bizarre (especially for a publication like Wired). Here's how it opens:

IBM JUST SPENT $34 billion to buy a software company that gives away its primary product for free.

IBM Sunday said it would acquire Red Hat, best known for its Red Hat Enterprise Linux operating system. Red Hat is an open source software company that gives away the source code for its core products. That means anyone can download them for free. And many do. Oracle even uses Red Hat’s source code for its own Oracle Linux product.

Spending billions to acquire an open source software company might seem strange.

Come on, Wired. It's 2018. Are we really still in an age where the idea that companies use "free" as part of their business model is somehow shocking or confusing to people? At this point, the idea that you can use free software to sell all sorts of other things, such as services, is pretty damn well established, and it's insulting to act like it's a huge shock that a business could possibly exist while giving away free software.

Just the fact that Red Hat has been so successful for so many years should have put the idea that "free" can't be a part of the business model to rest. Hell, IBM itself is another example of that, as it has invested heavily in open source software and made money by selling services as well. Perhaps Wired thinks very little of its readership, but to frame it as somehow surprising or confusing that a company that has open source software could somehow be worth so many billions of dollars is odd. Even more bizarre is to frame it as shocking that some other company needs to buy it out to validate that price. After all, Red Hat's market cap as a publicly traded company has been in the billions for years, and was approaching a similar valuation to IBM's buyout price around May and June before taking a hit on recent earnings.

Either way, there are potentially many interesting things to discuss concerning IBM purchasing Red Hat, from questions about the future of its products, to questions about cloud computing, open source, software services, patents and more. But... one thing that really isn't that interesting at this point in time is the fact that Red Hat built a business based on free software that it gave away. As we've said for over a decade, free never is the business model, but it absolutely can be part of any business model.

Reader Comments

I don't see anything wrong with Wired's article. Only those close to the software or network industry will be familiar with Red Hat and their business model. Giving away your primary product in the hopes of selling support contracts is still an alien concept to most of the rest of the world.

Re: Re:

Wired is close to that group, sure, but not all of their readers are. That was once a geek magazine, primarily for programmers and network wonks. These days it's aimed at the wider public. It may have a tech focus but the articles tend to be more fluff than substance.

Re:

The WIRED conversation illuminates how technology is changing every aspect of our lives—from culture to business, science to design. The breakthroughs and innovations that we uncover lead to new ways of thinking, new connections, and new industries.

Directly from Wired's mission statement. The problem with the article isn't that some random news organization failed to do their basic due diligence, it is that a news organization whose mission is explicitly to report on how technology is altering business failed to even consider how technology is altering business.

Re: Re:

That smells like whataboutism. Red Hat didn't monetize their source code or binaries in any way similar to either of those companies you mentioned. There are no interstitial ads popping up in your operating system, they're not collecting your data and selling it to the highest bidder and they're not using your machines with their software installed on them for anything at all. They sell support contracts to those who can afford and need them.

Re: Re: Re:

That smells like whataboutism.

I suppose if you don't know what whataboutism is, then sure.

From the opening graf of the Wikipedia entry on Whataboutism (links and formatting omitted):

Whataboutism (also known as whataboutery) is a variant of the tu quoque logical fallacy that attempts to discredit an opponent's position by charging them with hypocrisy without directly refuting or disproving their argument,[1][2][3] which in the United States is particularly associated with Soviet and Russian propaganda.[4][5][6] When criticisms were leveled at the Soviet Union during the Cold War, the Soviet response would often be "What about..." followed by an event in the Western world.[7][8][9]

Whataboutism requires an implication of hypocrisy, and an implication that a statement must be false based on who is making it. I did neither.

Comparing a company that makes money while giving away its main product for free to other companies that make money while giving away their main products for free is not Whataboutism. The word you're looking for is analogy. Or possibly comparison.

Your accusation of whataboutism is a non sequitur.

Red Hat didn't monetize their source code or binaries in any way similar to either of those companies you mentioned. There are no interstitial ads popping up in your operating system, they're not collecting your data and selling it to the highest bidder and they're not using your machines with their software installed on them for anything at all. They sell support contracts to those who can afford and need them.

Perhaps you're having trouble with the word "but".

As in, "Giving away your primary product in the hopes of selling support contracts is still an alien concept to most of the rest of the world" -- "But providing a free product to users and monetizing it through other means isn't."

Wired's article takes a gee-whiz, man-bites-dog approach to the idea that a company would give away a free product and turn a profit through other means.

You are correct that the other means in this case is not the same means that Google and Facebook use to turn a profit.

But the idea that a company can turn a profit on a free product is not a foreign one. It is not surprising. This is not 1998. Gaining profit on a free product through support may be unusual -- but gaining profit on a free product in general is not.

(Indeed, "Yes, Red Hat turns a tidy profit even though its product is free -- but unlike Google and Facebook, it doesn't do it by selling its users' data to advertisers" would have been a much better way for the article to frame the subject.)

You're fixating on differences -- differences which I implicitly acknowledged with my use of the word "but", which indicates a contrast -- while ignoring the similarities, and erroneously calling the comparison Whataboutism.

Re: Re: Re: Re:

The problem with your original assertion, and the aspect of it that resulted in my labeling it "whataboutism", is that bringing up Google and Facebook has nothing at all to do with the article or topic under discussion. That topic is "free product supported by paid contracts", not "free product supported by ads" or any other form of support.

I appreciate that you were trying to contrast the business model but it has no bearing on the discussion. Thus, it was a "but what about the ad-supported model?" point, out of place here.

"IBM JUST SPENT $34 billion to buy a software company that gives away its primary product for free."

I think the problem is that they've simply misidentified what Red Hat's primary product actually is. A common mistake, I believe, but people should be aware by now that the free aspects of their Linux distribution is not their primary company focus.

"Come on, Wired. It's 2018. Are we really still in an age where the idea that companies use "free" as part of their business model is somehow shocking or confusing to people? :"

Wired... don't they have a primary product that people can read for free if they wish? Hmmm...

(Yes, I know that they have taken efforts to stop ad blocking, but you can still do so, I believe).

Free to play games are big business,multiplayer games need users to buy costumes,poses,emotes and to play against.Many programs are free to use, the profit comes from charging for support or business,s pay for a version that has extra addons like voice chat.

Come on, Wired. It's 2018. Are we really still in an age >where the idea that companies use "free" as part of their >business model is somehow shocking or confusing to people? >At this point, the idea that you can use free software to >sell all sorts of other things, such as services, is >pretty damn well established, and it's insulting to act >like it's a huge shock that a business could possibly >exist while giving away free software.

Perhaps its time for someone to have Kevin Kelley to remind Wired to do better. I think they still listen to him.

Google and Facebook...

As mentioned above Google and Facebook offer the consumer facing products for free. They "give away" search, email, social messaging, etc and are some of the most valuable companies in the world.

Giving away something for free so that they can monetize it through other emans is core to their highly successful business model. They wouldn't have been able to achieve the scale they needed to support their primary business (selling advertising space to companie) without giving away their product. Wired gives a large chunk of its product away "for free". Slack etc give most of their product away for free in the hopes of getting people to upgrade to their offering with better service. "Free" is a core part of modern business.

Red Hat doesn't give away software nor support.

Historically HIGH! But actually LOW for today's printing trillion dollar a year "money" inflated stock market (none of which "economists" Masnick mentions because undermines his point), but at least it's got actual profit. IBM hasn't gone crazy, besides that it's in the same field, unlike Google which is a sprawling incoherent monster that's thrown billions of easily-gotten "money" away at unrelated obviously loony "concepts", like offshore power, fuel cells, and getting into ISPs.

Anyhoo, far as I can find, Red Hat software isn't given away free, or else I'd have tried it. May be requiring an email or registration -- which isn't free in the Linux tradition, it's spying in the teh internets way.

But at least this time Masnick carefully notes that "free" is PART of a business model, NOT the whole of it. That's progress. That and only works for "software" / non-material goods is all I ever wanted him to state. You cannot give away actual physical products for free. -- And no, Google is not "free", either, it's advertising supported, hidden cost in every product you buy.

But "loss leader" is NOT NEW even in computer area since at the 1960's by IBM itself charging for needed "support" as ongoing part of the cost for every product. NOT new "business model", especially NOT new for IBM. -- Which is now little more than "support".

Red Hat puts out a "loss leader" in hopes of profiting from selling "support" services needed to actually run that software. It's a suspect model because if the software was good, one wouldn't need "support", right? It's very near the Microsoft way of profiting from lacks and bugs and deliberate flaws, except that Windows was/is popular enough (hundreds of times what Red Hat will ever be) that can sell the OS outright too.

The actual point of this piece is just for Masnick to as ever asserts that he's been proved correct when it's the ANCIENT "support" scam!

(DID recently try Oracle supposedly from RH source code, and never got anywhere near to starting install, let alone a desktop! I admit to not trying over and over like a maniac because by that time had seen too many Linuxes simply flop to even hope. I've gone back to Windows 7, it WORKS as I want and reliable once remove javascript and other obvious malware vectors.)

Re: Red Hat doesn't give away software nor support.

Anyhoo, far as I can find, Red Hat software isn't given away free, or else I'd have tried it.

The free version of RHL is called Centos, or if you want up to date software, try Fedora. Both are given significant support by RedHat, with Centas being built from RHL sources, but with the branding changed.

Re: You would just need to do the work of compiling it.

Re: Re: You would just need to do the work of compiling it.

He'll be playing his usual game, and say that such things don't really count because they're not literally giving away the specific enterprise product. That will be the only thing that matters, not everything else they do, just that one thing that he can say isn't free.

One of his tricks is that when you prove him to be a liar for the thousandth time, the evidence that he's lying doesn't count for whatever reason he just made up.

The Fact Remains ...

Nevertheless, the world has moved on. Replacing UNIX is no longer sufficient. The decline in RHEL growth contrasted with the acceleration in Linux more broadly is a strong market indicator of the next wave of open source. Public cloud workloads have largely avoided RHEL. Container workloads even more so.

Evidently you still have to point it out:

Aren't We Past The Point Of Being Surprised That 'Free' Is A Part Of The Business Model?

I got past it when found that they weren't giving the "Don't Panic" buttons away FREE without buying the "Hitchhiker's Guide to The Galaxy" game. Ever since I've known that "there ain't no such thing as free" with software.

And with Red Hat / Linux, anyone who thinks they aren't going to pay for trying to get away from Windows is mistaken.